Summary
noting that, unlike a consent decree, a private settlement agreement does not generally carry the judicial review and oversight necessary to confer prevailing party status.
Summary of this case from Kossov v. PerrymanOpinion
99 CIV. 10900 (DLC)
February 21, 2002
Randal S. Jeffrey, Constance P. Carden, Yisroel Schulman, New York Legal Assistance Group, New York, NY, Counsel for Plaintiffs.
Deborah Sharp, Assistant Corporation Counsel, New York, NY, Counsel for City defendants Charles A. Miller, Caroline M. Brown, Covington Burling, Washington, D.C., Counsel for City defendants.
OPINION and ORDER
This motion for an award of attorney's fees requires a determination of whether the plaintiffs are prevailing parties under 42 U.S.C. § 1988 simply because the Court has agreed to retain jurisdiction over the enforcement of the agreement among the parties settling this litigation. For the reasons that follow, the plaintiffs are not prevailing parties under the standard articulated in the Supreme Court's recent ruling in Buckhannon Bd. Care Home, Inc. v. W. Va. Dep't of Health Human Res., 121 S.Ct. 1835 (2001), and their motion for fees is denied.
BACKGROUND
On October 29, 1999, plaintiffs filed this class action pursuant to 42 U.S.C. § 1983 against the Mayor of the City of New York, the Commissioner of the New York City Department of Social Services, the Commissioner of the New York State Office of Temporary and Disability Assistance, and the Commissioner of the New York State Department of Health. The complaint challenged in seven claims various aspects of the New York City system for providing food stamps and public assistance through the Eligibility Verification Review ("EVR") process. In an Opinion of June 12, 2000, the City defendants' motion for summary judgment on the first claim, which concerned food stamp benefits, was granted.
In a settlement agreement ("Agreement"), which was executed between May 18 and 23, 2001, the parties settled the claims against the City defendants that had survived motion practice. In the Agreement, the City defendants denied all liability but agreed to certain undertakings. Those undertakings were numerous and included that they would adopt a Medicaid determination management protocol which would require them to use an HRA computer program to track when Medicaid determinations are required to be made, give applicants for immediate cash grants additional written advice about certain EVR procedures, schedule EVR office interviews the day following receipt of certain applications, develop a log to track rescheduled EVR interviews, modify notices sent to schedule EVR home and office visits, computerize information reflecting a denial of benefits for a failure to provide truthful information, revise the notices sent to applicants when their requests for aid are denied, issue policy directives regarding a number of procedures and carry out those policies, tabulate bi-monthly the number of applications denied for failure to provide truthful information, adopt a method to insure that an applicant's food stamps will not be discontinued without the appropriate notice, modify their system for auditing compliance with the regulations concerning immediate cash grants and food stamps, make available to plaintiffs' counsel on a monthly basis a multitude of documents concerning the EVR process, and appoint a contact to investigate promptly and report back to plaintiffs' counsel in response to issues that plaintiffs' counsel may raise about compliance with the terms of the Agreement. Most of these commitments were made for a period of twenty-four months following the discontinuance of the action.
The Agreement acknowledged that an intended beneficiary of the Agreement could seek to enforce the Agreement in this Court and that attorney's fees and costs would be available under Section 1988 for any post-judgment enforcement action. The issue of plaintiffs' entitlement to attorney's fees and costs for the underlying action, however, was reserved for later motion practice.
In consideration for these commitments, the plaintiffs agreed to the dismissal of all of their outstanding claims against the City defendants. The Agreement stated that it would only become effective if the Order of Discontinuance included a provision in which the Court retained jurisdiction to enforce the Agreement. Although a copy of the Agreement was provided to the Court, the Agreement was neither filed with nor "so ordered" by the Court.
On June 1, 2001, the plaintiffs requested that the Court execute an Order of Dismissal without providing notice to the putative class members or conducting a fairness hearing. It argued that, since there had been no adjudication of the class certification issue, a hearing was unnecessary. On June 8, 2001, the Court "so ordered" a Stipulation and Order of Discontinuance executed by the plaintiffs and the City defendants. The Order acknowledged that the parties had entered into a settlement agreement and that the plaintiffs had "opted" to withdraw the outstanding claims against the City defendants with prejudice. It also provided that this "Court shall retain jurisdiction over the settlement agreement for enforcement purposes." On July 6, 2001, the Court also "so ordered" a stipulation in which the plaintiffs' claims against the State defendants were withdrawn without prejudice.
DISCUSSION
In Buckhannon Bd. Care Home, Inc. v. W. Va. Dep't of Health Human Res., 121 S.Ct. 1835 (2001), the Supreme Court rejected the "catalyst theory" as a basis for determining whether a party should be deemed a prevailing party and thereby entitled to an award of attorney's fees under Section 1988 and other similar fee-shifting statutes. Id. at 1840. After a recitation of the definition of "prevailing party" appearing in Black's Law Dictionary, and following a review of those decisions in which it had previously held that an award of fees was appropriate, it concluded that "we have held that settlement agreements enforced through a consent decree may serve as the basis for an award of attorney's fees" even though they do not always include an admission of liability since they are "nonetheless a court-ordered `chang[e] [in] the legal relationship between [the plaintiff] and the defendant.'" Id. (quoting Tex. State Teachers Assn. v. Garland Indep. Sch. Dist., 489 U.S. 782, 792 (1989) (second and third alterations in original)). It summarized its prior holdings as establishing "that enforceable judgments on the merits and court-ordered consent decrees create the `material alteration of the legal relationship of the parties' necessary to permit an award of attorney's fees." Id. (quoting Tex. State, 489 U.S. at 792-93). As a result of this analysis, it concluded that a defendant's voluntary change in conduct, even when it accomplished what the plaintiff had sought in filing the lawsuit, would be insufficient to make the plaintiff a prevailing party since that voluntary change "lacks the necessary judicial imprimatur on the change." Id. Similarly, private settlements do not confer prevailing party status since they do not entail "the judicial approval and oversight involved in consent decrees." Id. at 1840 n. 7.
"Black's Law Dictionary defines `prevailing party' as `[a] party in whose favor a judgment is rendered, regardless of the amount of damages awarded in certain cases, the court will award attorney's fees to the prevailing party. — Also termed successful party.'" Buckhannon, 121 S.Ct. at 1839 (quoting Black's Law Dictionary 1145 (7th ed. 1999)) (alterations in original).
The plaintiffs in Buckhannon based their claim for fees on the assertion that the state legislature had enacted a law to provide the relief the plaintiffs had sought through their lawsuit. The legislative change had resulted in the dismissal of the suit as moot. Applying the reasoning outlined above, the Court held that the Buckhannon plaintiffs were not prevailing parties.
Recently, the Second Circuit applied Buckhannon to reverse an award of attorney's fees when a private agreement providing the relief sought in a lawsuit also caused that suit to be dismissed as moot. N.Y. State Fed. of Taxi Drivers, Inc. v. Westchester County Taxi Limousine Comm'n, 272 F.3d 154, 157 (2d Cir. 2001). The Second Circuit relied, inter alia, on Buckhannon's teaching that "[t]he essence of being a `prevailing party' is achieving a `material alteration of the legal relationship of the parties' that is judicially sanctioned." Id. at 158 (quoting Buckhannon, 121 S.Ct. at 1840). The Second Circuit has also determined that a student who had succeeded in obtaining a school's voluntary compliance with the Individuals with Disabilities in Education Act was not a "prevailing party" under Buckhannon. J.C. v. Reg'l Sch. Dist. 10, 278 F.3d 119 (2d Cir. 2002); cf. Perez-Arellano v. Smith, ___ F.3d ___, 2002 WL 130426 (9th Cir. Feb. 1, 2002).
Here, there is neither an enforceable judgment on the merits nor a court-ordered consent decree. There is, instead, a private settlement agreement in which the defendants have agreed to take certain actions, an agreement that the parties and the Court have agreed may be enforced in this Court. The commitments the City defendants have made to the plaintiffs and the enforceability of those commitments through this Court is sufficient to constitute a material alteration in the legal relationship between the parties. The Court's continuing jurisdiction in order to enforce the terms of the Agreement does not, however, constitute a "judicial sanctioning" of the alteration of their legal relationship such that the plaintiffs can be considered prevailing parties under the Buckhannon standard.
The absence of any meaningful judicial review, oversight or "sanctioning" when a court simply retains jurisdiction to enforce a settlement agreement is highlighted when the judicial role in the creation and enforcement of a consent decree is contrasted with a court's role in enforcing a settlement agreement. The contrast begins with the scrutiny applied to the terms of a consent decree, and continues with the level of judicial involvement in enforcing a decree.
Although it may be minimal, there is a level of judicial scrutiny of the terms of a consent decree that is entirely absent when a lawsuit is dismissed based on the parties' agreement to settle it. When a district court is asked to approve a consent decree, it must make at least a "minimal determination of whether the agreement is appropriate to be accorded the status of a judicially enforceable decree." United States v. Int'l Bus. Machines Corp., 163 F.3d 737, 740 (2d Cir. 1998) (citation omitted). Before entering such a decree, the district court must be certain that the decree 1)
"spring[s] from and serve[s] to resolve a dispute within the court's subject-matter jurisdiction," 2) "come[s] within the general scope of the case made by the pleadings," and 3) "further[s] the objectives of the law upon which the complaint was based."
Kozlowski v. Coughlin, III, 871 F.2d 241, 244 (2d Cir. 1989) (quoting Local No. 93, Int'l Ass'n of Firefighters v. City of Cleveland, 478 U.S. 501, 525 (1986) (alterations in original)). When the "suit affect[s] the public interest, . . . the court must [also] be satisfied of the fairness of the settlement." Janus Films, Inc. v. Miller, 801 F.2d 578, 582 (2d Cir. 1986) (citation omitted). In contrast, when the lawsuit is dismissed by a stipulation, a court is "`indifferent' to the terms the parties have agreed to" unless the settlement is of a class action or has some other independent basis requiring judicial scrutiny. Id. (citation omitted). Consequently, even though the plaintiffs' lawsuit here clearly affects the public interest, since it was a private settlement resulting in the agreement of the parties to dismiss the lawsuit, the Court did not scrutinize the settlement's fairness or conduct any review of the terms of the Agreement before endorsing the stipulation dismissing the suit.
There is another substantive difference in the level of judicial involvement when the enforcement of settlement agreements is compared to the enforcement of consent decrees. Although, as agreements between parties, consent decrees are essentially construed as contracts, EEOC v. New York Times Co., 196 F.3d 72, 78 (2d Cir. 1999); United States v. Int'l Brotherhood of Teamsters, Chauffeurs, Warehousemen Helpers of America, 141 F.3d 405, 408 (2d Cir. 1998), and their terms cannot be expanded or contracted by the court, EEOC v. Local 40, Int'l Ass'n of Bridge, Structural Ornamental Iron Workers, 76 F.3d 76, 79 (2d Cir. 1996), because a consent decree is an "order of the court," courts have "equitable discretion to enforce the obligations imposed on the parties." United States v. Local 359, United Seafood Workers, 55 F.3d 64, 68 (2d Cir. 1995). Courts have
inherent power to enforce consent judgments, beyond the remedial "contractual" terms agreed upon by the parties. Unlike a private agreement, a consent judgment contemplates judicial interests apart from those of the litigants. Until parties to such an instrument have fulfilled their express obligations, the court has continuing authority and discretion — pursuant to its independent, juridical interests — to ensure compliance.
EEOC v. Local 580, Int'l Ass'n of Bridge, Structural Ornamental Ironworkers, 925 F.2d 588, 593 (2d Cir. 1991); see also Davis v. N Y City Housing Auth., 278 F.3d 64 (2d Cir. 2002); Local 359, 55 F.3d at 68-69.
In contrast, the enforcement of a settlement agreement must be pursued in state court unless there is an independent basis for the exercise of federal jurisdiction. Kokkonen v. Guardian Life Ins. Co. of America, 511 U.S. 375, 382 (1994). This is because an action to enforce a settlement agreement is in the nature of an action to enforce a contract. Id. at 381. Where, however, "the parties' obligation to comply with the terms of the settlement agreement had been made part of the order of dismissal — either by separate provision (such as a provision `retaining jurisdiction' over the settlement agreement) or by incorporating the terms of the settlement agreement in the order" — a federal court retains jurisdiction to enforce the settlement agreement.2 Id. (emphasis supplied); see also Hester Indus., Inc. v. Tyson Foods, Inc., 160 F.3d 911, 917 n. 2 (2d Cir. 1998); Scelsa v. City Univ., 76 F.3d 37, 40 (2d Cir. 1996). In such circumstances, a breach of the settlement agreement becomes a violation of "the order and ancillary jurisdiction to enforce the agreement would therefore exist." Kokkonen, 511 U.S. at 381; see also Herrick Co., Inc. v. SCS Communications, Inc., 251 F.3d 315, 327 (2d Cir. 2001); Geller v. Branic Int'l Realty Corp., 212 F.3d 734, 737 (2d Cir. 2000).
Although there had been a suggestion that the reading of the settlement agreement into the record or the attachment of the agreement to the stipulation and order of dismissal may be enough to incorporate its terms, see Scelsa, 76 F.3d at 41 n. 1, it is now clear that the mere attachment of an agreement to a stipulation of dismissal is not sufficient to incorporate it, see Hester, 160 F.3d at 914, 916.
Finally, even though a court may retain power to enforce a settlement agreement, there remains another difference between the exercise of that power and the enforcement of a consent decree that is material to the Buckhannon analysis. A "consent judgment or decree" is defined as "an agreement of the parties entered upon the record with the sanction and approval of the [c]ourt." Schurr v. Austin Galleries, Inc., 719 F.2d 571, 574 (2d Cir. 1983) (citation omitted) (alteration in original). A consent decree is normally conditioned on being "so-ordered by the court" and is directly enforceable through the district court's contempt power. Benjamin v. Jacobson, 172 F.3d 144, 157 (2d Cir. 1999), cert. denied, 528 U.S. 824 (1999); see also Scottish Air Int'l, Inc. v. British Caledonian Group, PLC, 81 F.3d 1224, 1228, 1230 (2d Cir. 1996) (contempt power applicable to so-ordered agreement settling shareholder derivative action); Local 580, 925 F.2d at 592 (contempt power applied to consent judgment); Local 40, 76 F.3d at 80; Manhattan Indus., Inc. v. Sweater Bee by Banff, Ltd., 885 F.2d 1, 5 (2d Cir. 1989); Sec. Exchange Comm'n v. Levine, 881 F.2d 1165, 1180 (2d Cir. 1989).
A consent judgment, also called an agreed judgment, is "[a] settlement that becomes a court judgment when the judge sanctions it." Black's Law Dictionary 846 (7th ed. 1999).
In contrast, when a case is dismissed based on the stipulation of the parties, that dismissal is effected through Rule 41(a)(1), Fed.R.Civ.P., and provides no basis for a finding of contempt. In Hester Industries, 160 F.3d 911, a private settlement agreement of a federal trademark litigation included a term that the dismissal of the litigation was "dependent on the terms of [the settlement agreement] being subjected to enforcement by specific performance by the United States District Court." Id. at 913. When the plaintiff later sued for breach of the agreement, it also sought to hold the defendant in contempt for violation of the court's order. The Second Circuit held that because the district court lacked authority to condition the dismissal on compliance with the settlement agreement, it lacked a basis for finding contempt. Id. at 916-17. Thus, while a consent decree can be enforced through a contempt proceeding, a party's obligation to comply with a settlement agreement over which jurisdiction had been retained is enforced through a lawsuit, albeit in federal court. See Martens v. Thomann, 273 F.3d 159, 172 (2d Cir. 2001) (describing different enforcement mechanisms); Benjamin, 172 F.3d at 157.
In sum, the level of judicial supervision and oversight exercised over the Agreement between City defendants and plaintiffs in this case stands in stark contrast to that which would exist if there had been a consent decree resolving this litigation. The Court did not review the terms of the Agreement before dismissing the case. The Court has jurisdiction over the enforcement of the Agreement only because of an explicit agreement by the Court to retain jurisdiction. Finally, the retention of jurisdiction only serves to guarantee to the plaintiffs a federal forum should they pursue enforcement of the Agreement; it does not permit the terms of the Agreement to be enforced through contempt proceedings. Consequently, the Court's retention of jurisdiction over the enforcement of the settlement agreement does not constitute judicial approval and oversight sufficient to confer prevailing party status on the plaintiffs under Buckhannon.
In three other district court decisions that have conferred prevailing party status on plaintiffs following Buckhannon, there has been more judicial oversight than exists here. In National Coalition for Students with Disabilities v. Bush, 173 F. Supp.2d 1272, 1279 (N.D.Fla. 2001), the court had ordered the parties to "abide by their settlement," and in Johnny's Icehouse, Inc. v. Amateur Hockey Ass'n, No. 00 Civ. 7363, 2001 WL 893840, at *3 (N.D.Ill. Aug. 7, 2001), the court's order incorporated the terms of the settlement, including the obligations imposed on the defendants to refrain from certain actions. In Christina A. v. Bloomberg, 167 F. Supp.2d 1094, 1098-99 (D.S.D. 2001), the court held a fairness hearing and approved the terms of a class action settlement. While the Ninth Circuit in Barrios v. Cal. Interscholastic Fed., 277 F.3d 1128 (9th Cir. 2002), declined to follow passages in Buckhannon that it characterized as dicta and found a plaintiff to be a prevailing party because the district court had retained jurisdiction over the issue of attorney's fees, id. at 1134 n. 5, that decision appears to have been driven largely by a desire to follow Ninth Circuit precedent, id., a consideration that does not bind this Court.
CONCLUSION
For the reasons stated above, plaintiffs are not "prevailing parties" and their motion for attorney's fees is denied.
SO ORDERED.